COMMODITIES-Oil, metals on defensive; Fed puts investors on edge
* Markets down again, Fed may slow stimulus * Brent oil hits 3-week low, copper sinks to 2013 low * Gold firms from 7-month low but seen vulnerable By Barani Krishnan and Veronica Brown NEW YORK/LONDON, Feb 21 (Reuters) - Oil fell to a three-week low on Thursday and copper hit a 2013 bottom as demand for commodities weakened and worries grew that the U.S. central bank might scale back its program of adding liquidity to the financial markets. Spot gold recovered from the seven-month lows of the previous day on technical buying, although some traders said it could be vulnerable to further losses. The world's largest gold-backed exchange-traded fund said it experienced its largest one-day outflow in 18 months in Wednesday's selloff. Grain prices also eased, with wheat hitting an eight-month low after heavy snow in the U.S. Plains should provide needed moisture for the hard red winter wheat, which is used to make bread. The Thomson Reuters-Jefferies CRB index, a global commodities benchmark, fell 1.2 percent for its sharpest one-day slide since early November. Fourteen of the 19 markets tracked by the CRB fell, with wheat, crude oil and nickel prices down at least 2 percent each. Most commodities had also tumbled on Wednesday after rumors that a hedge fund was liquidating positions pushed prices below key support levels. FED'S NEW COURSE PLAYS DEEPER INTO MARKETS The U.S. Federal Reserve added to the selling pressure in gold when minutes of its January policy meeting - published on Wednesday afternoon - suggested that it might slow or stop its asset buying program before a pickup in U.S. employment becomes evident. The Fed's rethink of its bond-buying program played a broader role in market sentiment on Thursday as a ream of weak U.S. data fueled skepticism about the bullish bets that some investors had placed on the economy since the start of the year. The number of Americans filing new claims for unemployment benefits rose last week and consumer prices were flat in January, according to the data, which also pulled U.S. stock indexes lower. LOOKOUT FOR VULNERABLE COMMODITY FUNDS Analysts braced for more bad news about commodity funds that have been long the market if bearish data persists. At one point in Wednesday's sell-off, U.S. crude fell 0.7 percent in just about a minute as talk heightened of a commodities hedge fund in trouble. Prices eventually finished the session about 2 percent lower. "Yesterday's action was most likely not the result of a fund imploding ... but that is not to say there are not funds vulnerable out there," said Stephen Schork, who writes the energy markets commentary The Schork Report. Since mid-December, hedge funds and other large speculators had nearly doubled their bets that oil prices would rise, amassing positions in Brent and U.S. crude oil futures and options that were equivalent to around 440 million barrels of oil, regulatory and exchange data showed. U.S. CRUDE OIL SUPPLY AT JULY HIGHS In Thursday's session, London's benchmark Brent crude closed down 1.8 percent at $113.53 a barrel. U.S. crude settled down 2.5 percent at $92.84. It was a clear retreat from the oil rally that began early this year and extended through Feb 8. In those six weeks, Brent rose by $10 to hit a nine-month high above $119 on Feb. 8 as signs of strong demand from China and lower Saudi supply raised expectations of a tighter market. "We've come off a long way, and just looking at the charts, Brent could come down to the $113 area," said Tony Machacek, a broker at Jefferies Bache in London. In a potentially worrying sign to oil traders, the Energy Information Administration said that U.S. inventories of commercial crude oil hit their highest level since July 2012 last week. COPPER AT 2-MONTH LOW Copper slid to its weakest level in two months on a lack of metals demand in top consumer China and on news that the country was placing curbs on its influential property sector. China - which accounts for 40 percent of copper demand - on Wednesday restated its intention to extend a pilot property tax program to more cities in the latest effort to calm frothy real estate markets. "Clearly the Chinese real estate market is very, very important both in terms of its confidence effects and the impact it has on the overall construction industry," said Nic Brown, head of commodities research at Natixis in London. Copper is a key raw material used in building construction. Three-month copper on the London Metal Exchange finished down 1.3 percent at $7,860 a tonne, adding to Wednesday's 1 percent loss. Losses over the last two days have also pushed copper into negative territory for the year. Prices at 4:41 p.m. EST (2141 GMT) LAST/ NET PCT YTD CLOSE CHG CHG CHG US crude 92.96 -2.26 -2.4% 1.2% Brent crude 113.71 -1.89 -1.6% 2.3% Natural gas 3.246 -0.033 -1.0% -3.1% US gold 1578.20 0.60 0.0% -5.8% Gold 1575.26 12.97 0.8% -5.9% US Copper 355.30 -5.50 -1.5% -2.7% LME Copper 7861.00 -99.00 -1.2% -0.9% Dollar 81.369 0.300 0.4% 6.0% US corn 690.75 -9.75 -1.4% -1.1% US soybeans 1487.75 5.00 0.3% 4.9% US wheat 721.25 -17.25 -2.3% -7.3% US Coffee 141.75 0.75 0.5% -1.4% US Cocoa 2143.00 16.00 0.8% -4.2% US Sugar 18.12 -0.23 -1.3% -7.1% US silver 28.699 0.077 0.3% -5.1% US platinum 1620.00 -27.10 -1.6% 5.3% US palladium 733.60 -2.80 -0.4% 4.3%
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DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.
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